Con-way Freight says it expects the company's operating profit to fall by nearly a third in the fourth quarter because soaring healthcare costs are offsetting improvements in shipping demand.
The less-than-truckload carrier expects to post an operating profit of $2 million for the quarter, down about 29 percent from the year before, on $736 million in sales.
The company, the third largest LTL carrier in the U.S., said yield improved 4.9 percent, indicating stronger pricing. Healthcare costs grew $11 million in the quarter, the company said in an update on its financial outlook.
Con-way worked last year to raise its rates and rid its books of under priced freight in the wake of an LTL price war in 2009.
A surge in freight in the second quarter swamped the carrier, raising its purchased transportation and operating costs. That led to a change in management and reorganization in the third quarter.
Con-way Freight had a $13.1 million operating profit in the third quarter, on $797.1 million in revenue. It had a $17.2 million operating profit in the second quarter, and a $3.1 million loss in the first quarter of 2010.
"We are encouraged by the improvement in pricing and progress of our operating cost reduction initiatives begun in the third quarter," said Con-way President and CEO Douglas W. Stotlar.
"However, the magnitude of the increased health care expense outpaced the benefits gained from the reduced operating costs and higher pricing," he said.
Stotlar said Con-way began addressing health care costs in mid-2010, introducing new plan options and benefit changes designed to rein in increasing costs. Those changes took effect Jan. 3.
Con-way will release consolidated financial results for the fourth quarter and full year of 2010 on Feb. 2.
-- Contact William B. Cassidy at email@example.com.